INFINITE ARBITRATION CLAUSES.

• Author: Hortoit, David

For decades, the Supreme Court has expanded the Federal Arbitration Act (FAA) and companies have placed arbitration clauses in hundreds of millions of contracts. This Article examines a less-obvious way in which arbitration's tendrils are growing. Once, even the broadest arbitration provisions only governed allegations that were somehow connected to the agreement between the parties (the "container contract"). As a result, they often did not cover shocking and unforeseeable misconduct, or parties who did not sign the container contract, or claims that arose after the agreement lapsed. But now businesses are experimenting with what this Article calls "infinite" arbitration clauses: those that mandate arbitration for all disputes between any related party in perpetuity. Moreover, to cut courts out of the loop, drafters are coupling infinite provisions with so-called "delegation" clauses, which give the arbitrator the exclusive right to determine whether to send a cause of action to arbitration.

The Article reveals that courts are divided about whether to take infinite provisions literally. At first, most judges refused to allow companies to compel arbitration in such broad strokes. Yet the Court has recently decided a rash of cases that imply that the FAA overrides judicial hostility to boundless arbitration provisions. Thus, infinite clauses are caught in a tug-of-war between state contract rules that protect individuals from overreaching and the Justices' view that the FAA makes arbitration agreements bulletproof.

To resolve this conflict, the Article offers a theory about the limits of corporate power to opt out of the judicial system. First, it argues that some infinite provisions are not valid because they attempt to impose arbitration on plaintiffs who did not truly agree to the process. Second, it contends that even when a plaintiff did agree to arbitrate, the robust federal policy in favor of arbitration does not apply to lawsuits that have no logical relationship to the container contract. Finally, the Article uses these insights to propose solutions to the numerous problems raised by ultra-broad arbitration clauses.

INTRODUCTION I. SCOPE WARS A. Conventional Arbitration Clauses B. Infinite Arbitration Clauses 1. The Rise of the Infinite Clause 2. Judicial Skepticism 3. The Arbitration Revolution a. Preemption b. Delegation II. REGULATING INFINITE CLAUSES A. The Limits of Infinite Language 1. Agreement Challenges 2. Scope Challenges B. Delegation CONCLUSION INTRODUCTION

In 2012, Diana Mey added her name to her husband's AT&T Mobility wireless account. (1) To complete the transaction, she signed Mobility's Customer Agreement on an electronic pad at the cashier's counter. (2) Mobility's fine print contained an arbitration clause that applied to "all disputes" between Mey and Mobility's "subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns." (3)

Three years later, AT&T, Inc., Mobility's parent company, acquired DIRECTV Group Holdings, DIRECTV's parent company. (4) Thus, Mobility and DIRECTV became "corporate cousins at least seven times removed." (5) In 2017, DIRECTV made obnoxious telemarketing calls to Mey's cell phone. (6) Mey, whose number was on the Do Not Call Registry, sued DIRECTV for violating the Telephone Consumer Protection Act (TCPA). (7) DIRECTV responded by moving to compel arbitration. (8) DIRECTV did not contend that Mey had ever been a DIRECTV customer or that there was any agreement between itself and Mey. (9) Instead, DIRECTV argued that because it was an "affiliate" of Mobility, it was entitled to invoke the arbitration provision in the contract that Mey had formed with Mobility in 2012. (10)

Michelle Haasbroek was a skincare specialist for Steiner Transocean in the spa on board a cruise ship. (12) One night, when Haasbroek was off-duty, she was raped and impregnated by a coworker. (13) Haasbroek sued Steiner for failing to insure her safety, for mistreating her after she reported the incident, and for wrongful birth. (14) The company sought to enforce the arbitration clause in her employment contract. (15) As Steiner noted, even though Haasbroek's allegations were disturbing, she had agreed to arbitrate "[a]ny and all disputes, claims or controversies whatsoever ... [including] failure to provide prompt, proper and adequate medical care, personal injury, [or] death." (16)

In March 2012, Kaylee Heffelfinger opened a checking and a savings account with Wells Fargo Bank. (17) She filled out and signed an application. (18)

Unbeknownst to Heffelfinger, she was already a Wells Fargo customer. (19) Three months earlier, before she had ever contacted the bank, its employees had forged her signature on the paperwork for two phantom accounts. (20)

Then, in October 2012, Wells Fargo personnel created two more bogus accounts in her name. (21) This time, the application contained no signature at all. (22)

Over the next two years, these sham accounts began to accrue unpaid fees. (23) By the time Heffelfinger discovered the fraud, collection agencies were hounding her and her credit score had been ruined. (24)

Heffelfinger's experience was not unique. In 2016, Wells Fargo admitted that its employees had generated 3,500,000 fake accounts in the names of more than 2,000,000 real people. (25) The institution faced a torrent of criticism and scrutiny from lawmakers, (26) consumer watchdogs, (27) and journalists. (28) It pushed out its CEO, (29) entered into a $105 million consent decree with the Consumer Financial Protection Bureau, (30) and agreed to pay a total of $575 million in fines to states. (31)

But because Wells Fargo's remedial efforts did not make all of its customers whole, Heffelfinger filed a class action in federal court. (32) Here the bank had an ace up its sleeve. When Heffelfinger had applied for her legitimate accounts in March 2012, she had agreed to the bank's Consumer Account Agreement. (33) This contract mandated arbitration for "any unresolved disagreement between you and the Bank," including those "about the meaning, application or enforceability of this arbitration agreement." (34) Citing this language, Wells Fargo did not just argue that Heffelfinger had agreed to arbitrate the merits of her lawsuit; rather, the firm contended that Heffelfinger had agreed to arbitrate the very question of whether she had agreed to arbitrate the merits of her lawsuit. (35)

Forced arbitration is a hallmark of the modern American civil justice system. In 1925, Congress passed the Federal Arbitration Act (FAA) to abolish ancient rules that made predispute arbitration clauses unenforceable. (36) In the 1980s, the Supreme Court dramatically expanded the statute, provoking debate about whether private dispute resolution was an elegant alternative to the pathologies of litigation (37) or "do-it-yourself tort reform." (38) Since 2010, the Justices have gone further, issuing a rash of opinions that have encouraged businesses to use arbitration as a shield against class actions. (39) Not surprisingly, studies have found arbitration clauses in millions of consumer and employment contracts. (40)

This Article identifies a subtler way in which arbitration's shadow is growing. Traditionally, companies only attempted to mandate arbitration of disputes that were connected to the contract that included the arbitration provision (the "container contract"). Thus, until recently, even the broadest arbitration clause only applied to "any controversy or claim ... arising out of or relating to this agreement." (41) Now, however, drafters have become more ambitious. In rising numbers, they have started to experiment with what I call "infinite" arbitration agreements.

Infinite arbitration clauses exhibit one or more of the following characteristics. First, they are "not limited to disputes arising from or related to the transaction or contract at issue." (42) For instance, Wells Fargo's customers agree to arbitrate "[a]ny unresolved disagreement," (43) and Steiner's arbitration clause covers "all disputes, claims or controversies whatsoever." (44) Thus, infinite provisions attempt to govern conduct that has nothing to do with the original transaction, such as sexual harassment after the purchase of household goods (45) or "a punch in the nose during a dispute over medical billing." (46) Second, infinite clauses extend beyond the original contractual partners. Like Mobility's Customer Agreement--which applies to the parties' "subsidiaries, affiliates, agents, employees, predecessors in interest, successors, and assigns, as well as all authorized or unauthorized users"--infinite clauses govern all persons or entities with a connection to the container contract. (47) Third, infinite provisions have no sunset date. Although the common law condemns perpetual contracts, infinite clauses "survive the closing of [an] account or termination of any service." (48) Finally, infinite clauses often appear alongside what the Supreme Court has dubbed "delegation clauses": terms that give the arbitrator the exclusive right to decide gateway questions of "arbitrability" (whether a claim must be submitted to arbitration). That is, under contracts like Wells Fargo's, a plaintiff must participate in the arbitration process in order to argue that her complaint falls outside the boundaries of the arbitration clause. (49) Infinite clauses stretch to the horizon and last forever. They are less a contractual provision and more a kind of arbitration servitude.

The Article begins by exploring the roots of this phenomenon. It reveals that infinite provisions are the byproduct of a neglected area of doctrinal confusion. Although no law review article has addressed the topic, (50) courts have long struggled with "scope arbitrability": whether an arbitration clause applies to a specific claim. (51) To be sure, the classic "broad" arbitration provision casts a wide net. (52) If a plaintiff sues...